The Uncomfortable Truth About Outsourcing Relocation
Is the so-called free service costing you more than the value the RMC is creating?
In The book “The Big Con” by Mariana Mazzucato and Rosie Collington, they explain, how the major global consulting firms have entrenched themselves into charities, the private sector, and of course the government. Making trillions of dollars by offering advice to organizations that think they are not smart enough to manage their own affairs. It goes into detail on how some of the most prestigious organizations on earth, have been tied up in very nefarious situations and how they are designed and structured to duck responsibility and the law. They also touch on one of the biggest scandals in the consulting world that led to the shuttering of Arthur Anderson, due to the global effects from the collapse of Enron and WorldCom and the subsequent development of the Sarbanes-Oxley act. The act prohibiting consulting and accounting firms from both consulting with and auditing the same customer in the United States.
When I read the book, with the mobility industry in mind, the uncomfortable truth about outsourcing in relocation crystallized. Outside consultants (Relocation Management Companies) have made corporations “dependent” on them and with that dependency comes risk. In a nutshell, the organization outsources the relocation management service because of cost restraints, or the organization thinks that they do not have the core competency to run it inhouse. The Relocation Management industry presents themselves as industry experts and like the big consulting firms many of them offer “free services” to take market share, making them seem a safe and cost-effective solution. (Keeping in mind, nothing is free. You can not have hundreds of employees and offices around the world for free). More importantly but not as obvious is the fact that with outsourcing the organization loses the learning-by-doing in house expertise, making the organization more reliant on third party companies because of their lack of inhouse knowledge. The RMC becomes intrenched as the industry expert and with that, they control the narrative.
The book goes on to say that because of the dependency on the consulting firm we fall victim to what they refer to in the book as “impression managers” who deliver images, impressions, presentations, and theories to convince existing clients and potential clients of their legitimacy and ability to create value. If you control the narrative, you can also spin your agenda. Quick example of controlling the narrative, has anyone ever noticed that Lump Sum was challenged by a core-flex program and that the core services, recommended by all RMCs, just happen to be all their commissionable services? Or as Airbnb started to take off, challenging temp accommodations, “duty of care”, was the new buzz and the number one concern and topic in the industry for a good two years?) As Prime minister David Cameron referenced in the book “we have been living under a regime of government by management consultants and developing policy buy power point”. The book also refers to commodified solutions, cut and paste services that are sold by high level sales executives and delivered by low level administrators.
The real uncomfortable situation however, that no one seems to talk about in the mobility industry, is the fact that many RMCs offer both consulting and auditing services. When the RMCs came to market in the household goods space, they came in as auditors and charged a fee to audit the invoices from the Movers. Most relocation management companies now work on commission, referral fees or hidden van line commission. Not only do some of them manage the move, but they also audit the final invoice to the client. The household goods side of the relocation is by far the most unregulated and confusing portion of a relocation, and they are paid on the cost of the move. Along with their management function they are literally auditing their own commissions.
Now relocation costs are not even a rounding error in many organizations. But with the combination of little or no internal knowledge of the industry, coupled with a dependency on outsourced consulting firms, that may both manage and audit the costs, leads one to yet another uncomfortable question. Who is watching the watchmen? When I talk about this strange level of trust for the RMC everyone says. They are forced to outsource as they do not have the core competency to manage the program in house. No one really tracks it, as it is paid by the cost center the transferee is relocating into. The service is free. Or the flat out, no one cares about the cost, particularly the people using the service on a day-to-day basis. (Traditionally the end user is not overly concerned about cost, they only want ease of use). I however disagree with all the above, the user cares but are forced to reduce costs, someone in the C-suite cares but has trouble wrapping their head around the voodoo and of course the organization cares about getting the best return on investment. Leading many firms to simply wash their hands of the entire service and offer a simple lumpsum program.
So, what do you do? The administrators are under pressure to reduce costs, upper management don’t understand the overly complicated service on the “impression managers” slide deck and no one internally really knowns what to even look for other than quality surveys and shiny dashboards because of their lack of learning-by-doing. Well, the answer could also be found in the book. The book refers to a term called “sandboxing”. A suggestion that organizations should start bringing some of the business back inhouse and playing with variable alternatives to outsourcing. Breakaway projects and training that encourages internal people to get a better idea of the processes and costs of services. Giving them the ability to self-audit and understand services and in doing so growing your own internal competency, or at the very least developing a good understanding of what you are paying for. The household goods piece has been broken out by several companies and handled as a separate contract or what is referred to as a flow-through. Eliminating added costs from referral fees and eliminating up to eight handoffs of the same information on the management side. Also, and more importantly it allows the corporation to be educated by the provider and get a much better handle on the most confusing and unregulated service in mobility.
In short perhaps it is time to get out of the RMC orbit and speak directly to industry experts or ask uncomfortable questions. Playing in the sandbox will not result in eliminating the RMC, they are too big and integrated into many organizations, but it could mean telling them what you are looking for in the service, rather than simply accepting what they are selling you. Having them tighten up their service and knowing enough about the business not to fall for self serving pitches or develop policy from their power points. I also recommend you read the book.
Customized moving offers:
- Confidential and independent household goods audits, on either a retainer or ad hoc bases
- Jargon free explanation on the moving process and costs
- An at- a- glance strategy for your team to quickly confirm the cost related to the service provided
- Suggestions to help you tweak and tighten up your current program with a few simple additions to your policy
- An innovative unique Lump Sum program
- Audit free comprehensive pricing model